Massachusetts law tightens regulatory oversight of private equity in healthcare

A new law in Massachusetts aims to limit the influence of private equity healthcare firms in the healthcare sector.

Gov. Maura Healey (D) signed An Act Enhancing the Market Review Process, H 5159, into law Wednesday. It “imposes reporting and financial requirements for private investors and other corporate affiliates and targets REITs,” according to attorneys at Ropes & Gray.

The governor said that the new law will “close loopholes in our regulatory processes so that for-profit providers like Steward Health Care are subject to the same transparency rules as non-profit providers,” adding, “As Attorney General, I spent years in court trying to hold Steward to this standard, and I’m glad that our laws will no longer be exploited in this way.”

Steward Health Care, a private hospital chain based in Massachusetts, filed for bankruptcy in May, leading to hospital closures, job losses and concerns about patient safety. 

According to ArentFox Schiff attorneys writing Thursday in the National Law Review, the new law will achieve this goal through coordination among the state’s Health Policy Commission, Department of Public Health and Center for Health Information and Analysis. Additionally, they said, the law expands the attorney general’s investigatory and enforcement powers “with particular attention to private equity investors, REITs [real estate investment trusts] and management services organizations (MSOs).”

Massachusetts is among an increasing number of states that are looking to pass, or have passed, legislation related to private equity in healthcare. California, Indiana, Minnesota, New Mexico and Oregon currently have programs that directly or indirectly regulate healthcare private equity.

Federal legislators, too, are looking to crack down on private equity investments, including transactions involving senior living and skilled nursing properties and operators.

In July, for instance, Sen. Ed Markey (D-MA) and Rep. Pramila Jayapal (D-WA) introduced the Health Over Wealth Act, which applies to nursing homes, hospitals, and mental or behavioral health facilities. A draft version of the bill circulated earlier had included assisted living in the mix of proposed covered entities; assisted living was removed from the bill, although confusion remains due to bill language and IRS definitions.

In June, Markey joined Sen. Elizabeth Warren (D-MA) in introducing the Corporate Crimes Against Health Care Act of 2024 to “root out corporate greed and private equity abuse” in assisted living communities, nursing homes, home health agencies, hospices and other “healthcare entities.” The senators said their action was prompted by “private equity greed and mismanagement by Ralph de la Torre and top executives drove Steward Health Care (Steward) — which operates eight hospitals in the state — into bankruptcy” in their home state.